SERVICE TAX ON AUCTIONEER’S SERVICES

[Dr. Sanjiv Agarwal]

Service tax has been imposed on auctioneer's services by the Finance Act, 2006 with effect from 1st May, 2006 (vide Notification No. 15/2006-ST, dated 25-4-2006.). The gross amount charged by auctioneer to a person in relation to services of auctioneer is chargeable to service tax.

Meaning of Auction of Property

Section 65(7a) defines auction of property as under —

"Auction of property includes calling the auction or providing a facility, advertising or illustrating services, pre-auction price estimates, short-term storage services, repair or restoration services in relation to auction of property."

Auction for property would imply that auction has to be necessarily for property. Any property (tangible or intangible, movable or immovable) should be the subject matter of auction. Only the following services in relation to auction of property are covered —

—    calling the auction

—    providing a facility

—    advertising or illustrating services

—    pre-auction price estimation

—    short term storage services

—    repair or restoration services

Meaning of Taxable Service (upto Finance Act, 2010)

Section 65(105)(zzzr) defined taxable services to mean  services provided or to be provided to any person, by any other person, in relation to auction of property, movable or immovable, tangible or intangible, in any manner, but does not include auction of property under the directions or orders of a court of law or auction by the Government.

A seller of property normally enters into an agreement with an auctioneer to conduct the auction for a consideration and such services shall be taxable.

The person who conducts an auction is called auctioneer. Auction could be any type such as open auction, auction through sealed bids or any other method.

To be a taxable service, following tests should be satisfied -

(a)   The activity or transaction should result in a service.

(b)   Service may be provided by any person to any other person.

(c)   Service should be in relation to auction of property.

(d)   Subject property in auction can be any property — movable or immovable, tangible or intangible, new or old etc.

(e)   Service can be provided in any manner.

Following auction  related services are specifically excluded —

(a)   auction of property under the directions or orders of a court of law

(b)   auction by the Government.

In CCE, Cochin v. Cardamom Marketing Corporation (2007 -TMI - 4383 - CESTAT, BANGALORE), where licenced auctioneer was engaged in the business of conducting cardamom auction and where sale of cardamom was completed by the fall of the hammer as per section 64(2) of Sale of Goods Act, it was held that such auctioneer was not engaged as a clearing and forwarding agent.

In CCE v. Cardamom Marketing Corporations (2008 -TMI - 32131 - HIGH COURT KERALA), where assessee was an auctioneer and engaged in business of conducting cardamom auction, it was held that such auctioneer could not be treated as clearing and forwarding agent by any stretch of imagination.

Amendments Made by Finance Act, 2010

Meaning of taxable service (w.e.f. 1.7.2010)

"Explanation - For the removal of doubts, it is hereby declared that for the purposes of this sub-clause, 'auction by the Government' means the Government property being auctioned by any person acting as auctioneer'.

The explanation clarifies the scope of 'auction by government' that it is not the auction of any property by the Government but the auction of any government property by any person (ie, auctioneer). Thus, auction of any Government property by an auctioneer shall be outside the scope of service tax. In other words, if the Government auctions any non- government property, it would be subject to levy of service tax.

The insertion of explanation is clarificatory in nature as it seeks to remove doubts or confusion. CBEC, has, vide TRU letter No 334/1/2010-TRU dated 26.2.2010 clarified this.

Now, if a property vested in any Government (Central or state) is auctioned by a private auctioneer (as in case of confiscated goods or seized properties) no service tax would be payable.

Person Liable

Any person providing taxable services in relation to auction of property shall be the person liable and treated as assessee for service tax purposes.

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